Japanese Government Boosts Mobile Payments Via Rewards in Environment of Risk

July 8, 2019         By: Steven Anderson

We’ve known for a while now that Japan—easily one of the most industrialized and advanced economies on the planet—is oddly laggard when it comes to mobile payments use. The reasons behind this odd disconnect are legion, but it’s also clearly a point the Japanese government wants to see turned around. To that end, it’s offering up some rewards to get users more into the fray, but it’s offering these rewards in the midst of a fairly risky environment.

How do we know it’s risky? A separate report serves as an example here, as word emerged from the Japanese branch of 7-Eleven noting that around 900 customers who used its mobile payments service have lost about 55 million yen  ($506,495 US as of this writing) due to unauthorized account access. That may not sound like much, especially when spread out over 900 customers, but that’s still about $563 per customer. That’s a lot to lose on mobile payments at 7-Eleven.

This comes when the Japanese government is eager to get users in mobile payments. Planning to increase the sales tax two percent starting this October—from eight percent to 10—the government plans to release at the same time a new rewards scheme. Those who use mobile payments, including quick response (QR) codes, will receive points that can be used for discounts on future purchases, almost like a nationwide loyalty program.

Here, we have a confluence of two events: the Japanese government eager to promote mobile payments and Japanese fraudsters eager to convince mobile payments users that they’re not at all safe. The Japanese rewards scheme might have worked here if it didn’t come hot on the heels of announcing to the entire country that the price of everything just went up two percent. Unless the rewards program is sufficiently robust to offer discounts deeper than the sales tax hike—and what would be the point of that to a revenue-starved government—this isn’t likely to make much headway.

There’s a chance this could work. The Japanese citizenry might see using mobile payments as a way to save cash in the midst of a massive cash grab on the government’s part, and respond accordingly. It might also, however, be a giant flop in the making, and only time will tell which way it ends.